Hotels/Restaurants/Casinos

Club Med shares jump after group returns to profit

Holiday company in talks with potential China investor

By

SimonKennedy

LONDON (MarketWatch) -- Shares in Club Mediterranee jumped around 10% Friday after the French holiday company swung to a profit, reported a sharp rise in bookings in recent weeks and said it's in talks with a potential partner in China.

The group reported a net profit of 3 million euros ($3.6 million) for the six months ended April 30, compared to a loss of €22 million a year earlier, and significantly stronger than the consensus forecast for a €3.6 million loss, according to a Dow Jones Newswires poll.

The group said the volcanic ash cloud that grounded flights over much of Europe earlier this year had knocked around €5.6 million off its profit.

Shares in Club Med (CU) rose 7.8% on Euronext's Paris market, having risen as much as 10.3% earlier in the session.

Revenue for the period slipped 5.5% to €679 million amid weaker European demand and reservations for the summer season are down 0.9% compared to a year earlier.

However, the group said bookings have surged in the last eight weeks. Reservations in that period are 18% ahead of a year earlier, due to very strong growth in the Americas and Asia.

Club Med plans to open a new holiday resort, which it calls a village, in Yabuli, China in November and another in Egypt in December.

By the end of 2015 it wants China to be its second-largest market, with 5 villages and 200,000 customers a year.

"To meet this objective and reinforce its development, Club Med is currently in talks about an industrial partnership with a Chinese group," the company said.

The potential partner in China could also take a minority stake in the business, the company said.

"The size of the investment is a key unknown fact for the moment; we think that if it is more than 5% and the shareholders takes a place in the board they it would send a strong and encouraging message, particularly if it concerns one of the experts in the sector -- for example with investments in Macao," said Oddo Securities Analyst Guillaume Rascoussier.

He added that the company had been successful in controlling the costs of the disruption earlier in the year and that rivals "have suffered much more" from the impact of the volcanic ash cloud.

Club Med is also moving its existing villages upmarket and plans to renovate two more during 2011.

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